Data Centre Development in Fife Feasibility Study January Maximising value through expertise

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Data Centre Development in Fife

Feasibility Study

January 2011

Maximising

value

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Appendices

Appendix 1: Site Locations Appendix 2: Flood Maps Appendix 3: Airport Locations

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1 The Brief

Fife Council aim to become Scotland’s leading region for renewable energy and are exploring a number of opportunities that would attract companies who would benefit from using large amounts of green electricity. Fife Council instructed the Jones Lang LaSalle Data Centre Advisory Group to provide a strategy report to assess the feasibility of Fife as a location for Data Centres. Specific reference has been made to the five sites previously identified by Fife Council that will also include renewable energy plants.

In identifying the viable opportunities for further investigation our commentary will cover the following aspects: • Site Due Diligence

• UK & Scotland Market Overview • Market Commentary

• Economic Impact • Target Audience • Recommendations

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2 Executive Summary

Fife Council instructed the Jones Lang LaSalle Data Centre Advisory Group to provide a report on the Data Centre Market in the UK, with specific reference to the feasibility of Fife as a data centre location, with specific reference made to the five pre-selected sites, and Fife Councils aim to become Scotland’s leading renewable energy region.

In assessing the viability of each site, inspections were undertaken along with meetings with a number of key stakeholders. Detailed due diligence studies have been completed for each site along with a Site Evaluation Matrix. Following these two processes we recommend that The Lexmark Facility, Rosyth, sites near to the Tullis Russell, Glenrothes, and the Westfield Development Centre, Cardenden, be considered for data centre use, with the Tullis Russell and surrounding sites being best suited due to the advancement in the construction of the bio mass plant.

We have outlined the competing regions that already contain data centres throughout the UK and Europe that are outside the traditional data centre market of the south east of England. Through evaluating a number of criteria we have produced a Regional Evaluation Matrix, where Fife scores favourably which in the main is due to the lack of green energy in the competing areas.

We have outlined a number of future recommendations one of which that will be pertinent to the success of Fife as a data centre location is for Fife Council to enter into a joint venture with a specialist data centre real estate provider. This approach will add credence to Fife as a realistic alternative location in the attempt to attract an anchor tenant and future tenants for data centre use.

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3 Due Diligence Process

3.1 General

The due diligence process considers the primary elements that have the potential to expose the data centre site to possible failure during its operation. The purpose of this review is to identify the potential risk elements and to provide our initial comments regarding the level and anticipated impact of each element.

Once a particular risk has been identified it is then possible to determine if that risk factor can be mitigated during the development at reasonable cost or whether the risk precludes the use of the site for Data Centre use. This process also highlights any potential marketing impact from negative elements.

Following the five site inspections carried out on the 9th_{& 10}th_{December 2010, (see Appendix 1 for site} locations) and the subsequent desk top due diligence process we have made the following evaluations relating to each site.

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4 Site Evaluations

4.1 Port of Rosyth, Dundas Road, Rosyth, Dunfermline, KY11 2XS 4.1.1 Site Background

The site designated for a potential data centre totals 5.31 acres within what is known as the Innova Campus, this site is one of seven development sites within the Port of Rosyth area which is being marketed as Europarc, Rosyth by Colliers CRE and Ryden. The Port of Rosyth development incorporates a number of mixed uses, these include, light and heavy industries, distribution warehouses, light manufacturing, the Rosyth to Zeebrugge ferry terminal, and a Ministry of Defence Naval dockyard.

4.1.2 Security of tenure

We understand that Scarborough Muir hold the feuhold (freehold) of the site, and on this basis we take the view there is no risk of eviction or cost control issues associated with ground-rents.

4.1.3 Local authority planning

Detailed enquiries of the local planning authority have not been made; however, we are not aware of any local authority, statutory, planning or other matters which we believe would adversely affect the development of this site for data centre use.

4.1.4 Adjacent activities

To the north of the site there is a child day nursery, a new office development and residential housing approximately 500m away. To the south of the site opposite Barham Road are a number of small distribution and manufacturing units, to the immediate east of the site is further redevelopment land which will be increased once the deconstruction of the Naval fuel depot is complete. None of the above are seen as hazardous or likely to have a negative impact on the site.

From our inspection there appears to be a number of hazardous activities that are carried out to the west within close proximity of the site. The main risks are associated with the Rosyth Naval dockyard which is operated by Babcock, whose key activities include base porting, refitting, refueling and decommissioning submarines; maintaining and refitting warships.

The close proximity of the Babcock dockyard and the inherent sensitivity and security risks associated with their work for the Ministry of Defence will be perceived as un-mitigating circumstances by any data centre operator or end user.

Approximately 300 metres north west of the site is HMS Caledonia a naval land support base commissioned in 1996, which may be perceived as a security risk.

Whilst there would not appear to be no other adjacent activities that give cause for concern it should be noted that nearby buildings’ use may change and could create future risks to the site operation. As such it is important that any future Data Centre operator remains alert to any planning applications in order to oppose or mitigate as necessary.

4.1.5 External fire risk

From inspection, it is evident that the distance to the adjacent buildings offers some benefits to the site as it reduces the potential for spread of fire from adjacent buildings.

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We cannot confirm if there is an explosive substance near to the site but from inspection, it is in our opinion likely due to the nature of the work undertaken within the dockyard. There are military, political and commercially sensitive users within the vicinity which heighten the security threat or might prevent or restrict access to the site in times of crisis, these fundamentally being associated with the Babcock dockyard that holds a license under the Nuclear Installations Act which allows for the decommissioning of nuclear submarines to take place within the facility.

4.1.7 Flood

We understand that a large section of the site known as the Innova Campus is located within the local flood plain as indicated in the attached plan from the Scottish Environment Protection Agency (SEPA)(Appendix 2). To the south of the site further land is vulnerable to flooding from the sea and the proximity of this land along with the risk of flooding on the site will be perceived as a risk by data centre operators.

4.1.8 Gas ingress

As with all buildings that introduce underground ducts in to the building, there is always the possibility of gas ingress via the fibre ducts. For this reason external, ventilated, fibre duct manholes, point of entry duct gas seals and a gas leak detection system should be provided to mitigate the risk of gas ingress to the building. 4.1.9 Electromagnetic interference

There are no cell-phone masts or overhead electric railway lines near the site and these are therefore not considered to be a particular risk factor to the operation of the site as a Data Centre. There are no low voltage magnetic field sources evident in the locality. The decommissioned railway line that runs east to west through Europarc does not have overhead electric cables.

4.1.10 Aerial impact

Edinburgh Airport is approximately 9 km to the south east as indicated in Appendix 3. Furthermore we noted on our site visit that there was no noticeable aircraft activity in the vicinity at the time. At present we are unable to source a flight path map for Edinburgh airports. We believe it is highly unlikely there will be any Aerial risk to the site.

4.1.11 Criminal activity & terrorist threat

For a terrorist organisation to consider an attack on any particular site it would be the result of a specific grievance against the operator. It is very difficult to prevent a determined attack other than by use of physical security measures i.e. substantial walls, fences, locked doors and gates etc. In this matter the operator of this site is in the same situation as any other Data Centre operator and is reliant on good security procedures and effective day to day site management.

However the security to this site will need to be heightened due to the political and commercial sensitivity of the surrounding sites along with the incumbent threat of a terrorist attack on the military base of HMS Caledonia, which may prevent or restrict access to the site in times of crisis.

4.1.12 Network availability

The site is advantageously located near to the A90/M90 and the Firth Bridge which is used by a number of Telecoms companies as their main trunk route between Edinburgh and the north east of Scotland. We understand that a number of fibre providers use this route including Thus, a subsidiary of Cable & Wireless.

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We have had no confirmation from Scarborough Muir as to the existing surplus power, or power infrastructure on the site.

We understand that the proposed bio mass plant will be located on the eastern edge of the land owned by Forth Ports. There are no further details relating to the potential power output of this plant, but for the purpose of this report we assume that there will be spare capacity for a data centre.

The supply to site should comprise an ‘A’ and ‘B’ system run over two independent cables to enable either to supply the site indefinitely. Failure to obtain the required capacity from either of the two independent cables will seriously affect the viability of the site.

4.1.14 Environmental Report.

We have not had accessibility to an environmental report relating to this site, and assume that no onerous or adverse soil conditions are to be found. Further investigation should be engaged directly with the land lord. 4.1.15 Risks’ review conclusion

From the operational risk perspective it is our opinion that this site is not technically suitable and viable for Data Centre use as the site does not comply with either operators or end user key requirements, namely:-

• Increased security due to surrounding occupiers • Partially within an area at risk of flooding from the sea • Potential restricted access in times of crisis (COMAH)

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4.2.1 Site Background

The site totals 15 acres and contains 155,557 sq ft (GIA) of warehouses and offices that up until 2006 was used by American printing firm Lexmark employing 700 workers. The site has been vacant since Lexmark left the site. The two buildings being considered for data centre use are known as Building 2 (73,229 sq ft GIA) and Building 4 (58,437sq ft GIA). The site had originally been used as a printer assembly plant and latterly was used for the manufacturing of inkjet cartridges.

We understand that Capital & Provincial hold the feuhold (freehold) of the site, and on this basis we take the view there is no risk of eviction or cost control issues associated with ground-rents.

Within The Town and Country Planning (Use Classes) (Scotland) Order 1997, the property is zoned for; Class 4. Business

(a) as an office, other than a use within class 2 (financial, professional and other services); (b) for research and development of products or processes; or

(c) for any industrial process; Class 5. General industrial

For the carrying on of an industrial process other than one falling within class 4 (business). Class 6. Storage or distribution

Use for storage or as a distribution centre

It is worth noting that previously data centre use has been classified as Sui Generis within the Use Classes Order 1987 (England). In 2009 a planning appeal decision concluded that data storage fell within Class B8 (Storage or Distribution) as the word “storage” had been taken literally so as to include electronic storage. Although this does not set a precedent within Scottish planning law, it does highlight the ambiguity and therefore the flexibility of data centres when trying to classify them within the Use Classes.

From inspection there does not appear to be any hazardous activities carried out on any adjoining site in the locality.

Running parallel to the north of the site is the A985, an adopted highway that accesses the A90 and subsequently the M90, north of the A985 there is agricultural land. This is replicated to the east and west. To the

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 9 south of the site are three industrial units that are occupied by Axon Cable Ltd, Acorn Pets and International Decorative Surfaces. These buildings are of a relatively new construction and should therefore be a relatively low fire risk.

Whilst there would not appear to be any adjacent activities that give cause for concern it should be noted that nearby buildings’ use may change and could create future risks to the site operation. As such it is important that any future Data Centre operator remains alert to any planning applications in order to oppose or mitigate as necessary.

From inspection, it is evident that the distance to the adjacent buildings offers some benefits to the site as it reduces the potential for spread of fire from adjacent buildings. As discussed above, the adjacent buildings do not represent an abnormal fire risk hazard to the potential Data Centre site.

4.2.6 Control of Major Accident Hazards (COMAH)

We cannot confirm if there is an explosive substance near to the site but from inspection, it is in our opinion unlikely. There are no potentially military, political or commercially sensitive users within the immediate vicinity which heighten the security threat or might prevent or restrict access to the site in times of crisis. However, the site is approximately 1 km north of Rosyth and the Babcock dockyard. This potential risk will be based on a clients individual perception as to what level of risk they believe is acceptable and will have to be managed through the marketing process..

4.2.7 Flood

We understand the site is not located within the local flood plain as indicated in the attached plan from the Scottish Environment Protection Agency (SEPA)(Appendix 2). In addition the site lies approximately 35m above sea level.

4.2.8 Gas ingress

As with all buildings that introduce underground ducts in to the building, there is always the possibility of gas ingress via the fibre ducts. For this reason external, ventilated, fibre duct manholes, point of entry duct gas seals and a gas leak detection system should be provided to mitigate the risk of gas ingress to the building.

4.2.9 Electromagnetic interference

There are no cell-phone masts or overhead electric railway lines near the site and these are therefore not considered to be a particular risk factor to the operation of the site as a Data Centre. There are no low voltage magnetic field sources evident in the locality.

Edinburgh Airport is approximately 10 km to the south east as indicated in Appendix 3. Furthermore we noted on our site visit that there was no noticeable aircraft activity in the vicinity at the time. At present we are unable to source a flight path map for Edinburgh airport. We believe it is highly unlikely there will be any Aerial risk to the site.

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Data centres are typically surrounded from the early stages of construction by high security. This would include the installation of a robust 3 metre security fence at the outset. This, coupled with a visible CCTV presence will have more of a deterrent effect on any would be petty vandals. Apart from the installation of a perimeter fence the Lexmark Facility already has a number of security measures which include roaming security patrols and CCTV.

The terrorist threat is generally a more determined and purposeful event. For a terrorist organisation to consider an attack on any particular site it would be the result of a specific grievance against the operator. It is very difficult to prevent a determined attack other than by use of physical security measures i.e. substantial walls, fences, locked doors and gates etc. In this matter the operator of this site is in the same situation as any other Data Centre operator and is reliant on good security procedures and effective day to day site management. 4.2.12 Network availability

We understand from Capital & Provincial that the fibre connectivity to the site is provided by BT. Further investigation should be undertaken by a network fibre consultant to establish the connectivity to the site.

4.2.13 Electricity supply

The site had a 6.8 MW power supply when the previous tenant Lexmark was in occupation. We understand from Capital and Provincial that the site has a dual fed power supply and that the original infrastructure is still insitu. At present we understand that the site has 5 MW of power available to the site, 3.7 MW of which is reserved. At present there is no proposed bio mass plant on this site.

The supply to site should comprise an ‘A’ and ‘B’ system run over two independent cables to enable either to supply the site indefinitely. Failure to obtain the required capacity from either of the two independent cables will seriously affect the viability of the site.

4.2.14 Environmental Report.

We have not had accessibility to an environmental report relating to this site, and assume that no onerous or adverse soil conditions are to be found. Further investigation should be engaged directly with the land lord. 4.2.15 Risks’ review conclusion

From the operational risk perspective it is our opinion that this site is technically suitable and viable for Data Centre use as the site complies with operators key requirements namely:-

• Potential to be Secure

• Potential power availability on site

• Potential ability to install further power and fibre • Outside and away from natural and man made hazards • Local Authority Consent for Storage use

It should be noted that although this site has legacy power infrastructure, and has the potential to be used as a data centre, at present there are no proposed plans for a bio mass plant, therefore this does not reflect Fife Councils aim to become Scotland’s leading region for renewable energy.

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The Tullis Russell site at Glenrothes has been used for the manufacturing of paper since 1809 and subsequently there are a number of buildings of varying age and condition distributed throughout the site. There are several areas highlighted for development, these include Site 1 and Site 2. These two plots to the north of the site have been selected by Tullis Russell for data centre use and are within close proximity of the biomass station. To the south of the Tullis Russell site, is Site 3 (Phase 2) that has outline planning permission for retail use.

Ground works have begun on an area of the site that will house a biomass power plant that will be the largest in UK with the capacity to produce 49 megawatts and replaces the existing coal fired power plant. The plant is scheduled for operation in Q4 2012 and is being constructed, owned and operated by RWE Npower. An area within the Tullis Russell site has been leased for five years to RWE Npower for car parking and construction logistics.

We understand that Tullis Russell own the feuhold (freehold) of the site, and on this basis we take the view there is no risk of eviction or cost control issues associated with ground-rents.

4.3.2.1 Local authority planning

There are a number of planning applications that relate to the Tullis Russell site, the pertinent applications in relation to this report are;

Planning consent has been permitted with conditions for the Erection of a Combined Heat and Power Plant, associated works, formation of temporary lay down areas and demolition of 2 dwelling houses (Planning Number 00/01101/CFULL).

An application has been permitted with conditions for the erection of a 49MW Biomass combined heat and power plant (including fuel storage, ancillary plant and equipment) and formation of access roads (Planning Number 05/02592/CEIA).

Running parallel to the north of the two designated sites are a number of residential dwellings directly adjacent to the two sites and a number of houses on the opposing side of the Cadham Road. There is a redundant petrol station that is now used as a car wash to the north east boundary of Site 2.

To the south of the two potential data centre development sites is the Tullis Russell paper mill that will also contain the completed Bio mass plant by Q4 2012. The Tullis Russell site has a number of buildings of different age and construction, none of these buildings though are within close proximity of Sites 1 & 2 and therefore are seen as relatively low fire risks. From inspection there does not appear to be any hazardous activities carried out on any adjoining site in the immediate vicinity of Sites 1 and 2 in the locality.

To the south of the main Tullis Russell site are a number of mixed use developments, these include a number of supermarkets (Asda, Aldi, and Morrisons) that are within the designated retail area of Glenrothes. To the south east of the Tullis Russell site are a number of office developments and a stage coach bus depot. A number of

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 12 units in this area between the Tullis Russell site and Queensway are owned by Fife Council with further acquisitions within this area proposed.

4.3.4 Site Size & Topography

The two sites that have been identified by Tullis Russell for data centre development total 1.57 acres (Site 1) and 3.28 acres (Site 2) respectively. Site 1 would offer a building of approximately 34,000 sq ft. This would be the minimum acceptable foot print for a data centre operator due to the relatively small gross floor plate and subsequently the small net technical area that could be constructed on the site.

Site 2 totals approximately 3.28 acres in size and is located on a relatively steep gradient for a development site and would therefore require a large amount of cut and fill. The site is also an awkward shape (see appendix 1). 4.3.5 External fire risk

From inspection, it is evident that the distance to the adjacent commercial buildings offers some benefits to the site as it reduces the potential for spread of fire from adjacent buildings.

We cannot confirm if there is an explosive substance near to the site but from inspection, it is in our opinion unlikely. There are no potentially military, political or commercially sensitive users within the vicinity which heighten the security threat or might prevent or restrict access to the site in times of crisis.

4.3.7 Flood

We understand the site is not located within the local flood plain as indicated in the attached plan from the Scottish Environment Protection Agency (SEPA)(Appendix 2).

4.3.8 Gas ingress

As with all buildings that introduce underground ducts in to the building, there is always the possibility of gas ingress via the fibre ducts. For this reason external, ventilated, fibre duct manholes, point of entry duct gas seals and a gas leak detection system should be provided to mitigate the risk of gas ingress to the building.

Edinburgh Airport is approximately 30 km to the south as indicated in Appendix 3. Furthermore we noted on our site visit that there was no noticeable aircraft activity in the vicinity at the time. At present we are unable to source a flight path map for Edinburgh airports. We believe it is highly unlikely there will be any Aerial risk to the site.

Data centres are typically surrounded from the early stages of construction by high security that includes the installation of a robust 3 metre security fence at the outset. This, coupled with a visible CCTV presence will have more of a deterrent effect on any would be petty vandals.

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 13 The terrorist threat is generally a more determined and purposeful event. For a terrorist organisation to consider an attack on any particular site it would be the result of a specific grievance against the operator. It is very difficult to prevent a determined attack other than by use of physical security measures i.e. substantial walls, fences, locked doors and gates etc. In this matter the operator of this site is in the same situation as any other Data Centre operator and is reliant on good security procedures and effective day to day site management. However, there are no military, political or commercially sensitive users within the immediate vicinity which may heighten the security threat, or which might prevent or restrict access to the site in times of crisis.

The site at present is serviced by BT. Further investigation should be undertaken by a network fibre consultant to establish the connectivity within the vicinity of Glenrothes.

At present the paper mill consumes approximately 16mva to 17mva of power with approximately 12mva of the total consumption being drawn from the national grid with the remainder coming from the existing coal fired power plant on site. The bio mass plant is due to generate 49mva of power.

There is an 11 kva sub station located to the south of the Tullis Russell site on Queensgate and a new 33 kva substation is to be built at the biomass plant.

Ideally the supply to the data centre site should comprise an ‘A’ and ‘B’ system run over two independent cables to enable either to supply the site indefinitely. Failure to obtain the required capacity from either of the two independent cables will seriously affect the viability of the site.

This is an important risk factor that must be confirmed prior to commencement. For the purposes of this report we are assuming that there will be an allocation of power from the biomass plant and or the national grid. 4.3.14 Environmental Report.

We have not had accessibility to an environmental report relating to this site, and assume that no onerous or adverse soil conditions are to be found. Further investigation should be engaged directly with Tullis Russell. 4.3.15 Risks’ review conclusion

From the operational risk perspective it is our opinion that the sites identified by Tullis Russell are not technically suitable and viable for Data Centre use as the sites do not comply with operators key requirements namely:- • The small size of development plot Site A

• The topography of Site B and the ensuing earth works

• The close proximity of residential dwellings to the sites and therefore the inherent noise attenuation planning issues

There are a number of other plots within the Tullis Russell site and surrounding area of Glenrothes that in our opinion are more suitable for use as data centre developments. These include the site known as Phase 2 to the south west of the site which totals approximately 10 acres, the land that has been leased to RWE Npower for 5 years, and the Fife council sites that are situated to the north of Queensway on the Queensway Industrial Estate. These sites may be a more attractive proposition with the benefit of the following prerequisites; • The proximity of the biomass plant

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The Westfield development site at present comprises of approximately 1,000 acres of agricultural land. Previously the site was used for open cast mining, and therefore has a large ‘man made’ quarry lake. The present outline scheme proposed by SRG Estates includes a mixed use development that will include a number of distribution warehouses, offices, depots, a waste power plant and a Combined Heat and Power (CHP) Plant. 4.4.2 Security of tenure

We understand that SRG Estates own the feuhold (freehold) of the site, and on this basis we take the view there is no risk of eviction or cost control issues associated with ground-rents.

We understand that there is an extant consent for a green business park , materials recycling facility and land fill, biomass power station .The consent was awarded in 2008, and for operational reasons not promoted. A further application has been submitted for a renewal, and the planning report is currently being written up for committee with a recommendation for approval.

4.4.3.1 Adjacent activities

The Westfield site is predominantly surrounded by agricultural land to the north, east and south. The west of the site is bordered by the Fife Environmental Energy Park (Westfield) that is occupied by Fife Energy, Scottish and Southern Energy (SSE), EPS and Scottish Coal. The adjoining site contains a 123mw gas-fired combined cycle gas turbine (CCGT) generatingpower station operated by SSE.

We do not envisage the location of the power plant to the Westfield site does not give rise to concern with the assumption that any data centre is not located adjoining the power plant but within an area of the site that gives a sufficient stand off. It should be noted that nearby buildings’ use may change and could create future risks to the site operation. As such it is important that any future Data Centre operator remains alert to any planning applications in order to oppose or mitigate as necessary.

From inspection, we do not envisage the existing power plant to be an external fire risk if the data centre is not located close by. The proposed buildings on the development site will be of a modern design and therefore will reduce the potential for spread of fire from adjacent buildings.

We cannot confirm if there is an explosive substance near to the site but from inspection, it is in our opinion unlikely. There are no potentially military, political or commercially sensitive users within the vicinity which heighten the security threat or might prevent or restrict access to the site in times of crisis.

4.4.6 Flood

We understand that the proposed site is not located within the local flood plain as indicated in the attached plan from the Scottish Environment Protection Agency (SEPA)(Appendix 2). However, a portion of the site south of the railway line is at risk of flooding and therefore any proposed development should be outside of this area.

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As with all buildings that introduce underground ducts in to the building, there is always the possibility of gas ingress via the fibre ducts. For this reason external, ventilated, fibre duct manholes, point of entry duct gas seals and a gas leak detection system should be provided to mitigate the risk of gas ingress to the building especially as this site has been extensively mined.

There are no cell-phone masts on the site. There are two overhead power lines on the site, one runs parallel to the site in a north westerly direction, with the other running perpendicularly to the southern boundary of the site. These overhead power lines do not constitute a negative impact on the site as long as any data centre is no less than 150 metres from the power lines. An railway line dissects the southern edge of the site, this is not an electronic railway line and it is our understanding that the line does not transport dangerous materials. There are no low voltage magnetic field sources evident in the locality

4.4.9 Aerial impact

Edinburgh Airport is approximately 50km to the south as indicated in Appendix 3. Fife airport is approximately 6 km due east of the site, this airfield is predominantly used as a general aviation airport for aeronautical

enthusiasts. Furthermore we noted on our site visit that there was no noticeable aircraft activity in the vicinity at the time. At present we are unable to source a flight path map for Edinburgh or Fife airports. We believe it is highly unlikely there will be any aerial risk to the site.

Data centres are typically surrounded from the early stages of construction by high security. On this occasion Fortis plan to install a robust 3 metre security fence at the outset. This, coupled with a visible CCTV presence will have more of a deterrent effect on any would be petty vandals.

The terrorist threat is generally a more determined and purposeful event. For a terrorist organisation to consider an attack on any particular site it would be the result of a specific grievance against the operator. It is very difficult to prevent a determined attack other than by use of physical security measures i.e. substantial walls, fences, locked doors and gates etc. In this matter the operator of this site is in the same situation as any other Data Centre operator and is reliant on good security procedures and effective day to day site management. However, there are no military, political or commercially sensitive users within the immediate vicinity which may heighten the security threat, or which might prevent or restrict access to the site in times of crisis.

We have had no confirmation from as to the fibre connectivity relating to the site. Further investigation should be undertaken by a network fibre consultant to establish the connectivity within the vicinity of the site.

The Westfield development site benefits from the proximity of the adjoining SSE power plant due to the relatively short dig in costs that will be incurred to allow a data centre site to become enabled, this is based on the assumption that there is spare capacity available from the power station. To ascertain as to the level of

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The site also has outline development plans to incorporate a waste power plant on the site that could directly power a data centre.

Ideally the supply to the data centre site should comprise an ‘A’ and ‘B’ system run over two independent cables to enable either to supply the site indefinitely. Failure to obtain the required capacity from either of the two independent cables will seriously affect the viability of the site.

We have not had accessibility to an environmental report relating to this site, and assume that no onerous or adverse soil conditions are to be found. Due to the intense mining that has previously occurred on the site further investigation should be undertaken.

4.4.14 Risks’ review conclusion

From the operational risk perspective it is our opinion that this site is technically suitable and viable for Data Centre location based on the proposed outlined development as the site complies with operators key requirements namely:-

• Potential to be Secure • Ability to install power

• Outside and away from natural and man made hazards • Bespoke Design and Build Opportunity

There are number of key factors that require further investigation to guarantee the suitability of this site for data centre use, namely the ability to secure power from either SSE or from the proposed waste power plant and the availability of fibre.

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St. Andrews University purchased the 37 acre Guardbridge site in Q4 2010. The site has been vacant since Q2 2008 when Curtis Fine Papers went into receivership. The University propose to construct a renewable energy biomass plant. The CHP plant will power and heat what is known as the New Hall area of St. Andrews where a number of research units and halls of residence are planned for development. The University envisage that any excess power may be used for a data centre, either run by a data centre operator or for the Universities own internal mission critical back up.

We understand that St. Andrews University own the feuhold (freehold) of the site, and on this basis we take the view there is no risk of eviction or cost control issues associated with ground-rents.

Detailed enquiries of the local planning authority have not been made; however, we are not aware of any local authority, statutory, planning or other matters which we believe would adversely affect the development of this site for data centre use.

Previous applications relate to the former use of the site: Reference No-04/00126/E_BW

Proposals-Move Fire Escape Door, Replace Two Windows and Fit New Roller Door to Paper mill Workshop. 4.5.3.1 Adjacent activities

From inspection there does not appear to be any hazardous activities carried out on any adjoining site in the locality. The immediate surrounding residential buildings to the west of the site opposite Main Street are of a relatively low fire risk.

Whilst there would not appear to be any adjacent activities that give cause for concern it should be noted that nearby buildings’ use may change and could create future risks to the site operation. As such it is important that any future Data Centre operator remains alert to any planning applications in order to oppose or mitigate as necessary..

From inspection, it is evident that the distance and the nature of the adjacent buildings offer some benefits to the site as it reduces the potential for spread of fire from adjacent buildings. As discussed above, the adjacent buildings do not represent an abnormal fire risk hazard to the potential Data Centre site.

We cannot confirm if there is an explosive substance within the immediate vicinity to the site. However Royal Air Force Leuchars Air base is situated approximately 1km north east of the site. The Station is primarily responsible for maintaining Quick Reaction Alert (North), providing crews and aircraft at high states of readiness 24 hours a day, 365 days a year, presently the airfield is a Tornado base but is changing to a Typhoon base.

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 19 This site will be perceived as a sensitive military base which could heighten the security threat or more realistically prevent or restrict access to the site in time of crisis.

4.5.6 Flood

We understand that the majority of the site is located within the local flood plain and is at risk of flooding from the sea as indicated in the attached plan from the Scottish Environment Protection Agency (SEPA)(Appendix 2). This will be perceived as unacceptable risk by data centre operators.

4.5.7 Gas ingress

As with all buildings that introduce underground ducts in to the building, there is always the possibility of gas ingress via the fibre ducts. For this reason external, ventilated, fibre duct manholes, point of entry duct gas seals and a gas leak detection system should be provided to mitigate the risk of gas ingress to the building especially as this site has been extensively mined.

4.5.9 Aerial impact

The proximity of RAF Leuchars, as mentioned previously will be perceived as a risk by data centre operators. See Appendix 3.

Data centres are typically surrounded from the early stages of construction by high security. On this occasion Fortis plan to install a robust 3 metre security fence at the outset. This, coupled with a visible CCTV presence will have more of a deterrent effect on any would be petty vandals.

The terrorist threat is generally a more determined and purposeful event. For a terrorist organisation to consider an attack on any particular site it would be the result of a specific grievance against the operator. It is very difficult to prevent a determined attack other than by use of physical security measures i.e. substantial walls, fences, locked doors and gates etc. In this matter the operator of this site is in the same situation as any other Data Centre operator and is reliant on good security procedures and effective day to day site management. 4.5.11 Network availability

The St. Andrews University Estates Department have informed us that a fibre route runs parallel to the site on Main Street. We understand that this fibre route includes BT, and Thus, this will be seen as a benefit to the site. 4.5.12 Electricity supply

The University propose to construct a renewable energy biomass plant. At present it is not understood as to the output capacity of the CHP plant. The plants main objective is to provide energy to the newly proposed St. Andrews campus, any residual power may be used for a data centre. Our investigations have been unable to ascertain the amount of power that entered the site whilst it was in operational use as a paper mill.

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 20 Ideally the power supply to the data centre site should comprise an ‘A’ and ‘B’ system run over two independent cables to enable either to supply the site indefinitely. Failure to obtain the required capacity from either of the two independent cables will seriously affect the viability of the site.

We have not had accessibility to an environmental report relating to this site, and assume that no onerous or adverse soil conditions are to be found. Due to the intense mining that has previously occurred on the site further investigation should be undertaken.

4.5.14 Risks’ review conclusion

From the operational risk perspective it is our opinion that this site is not technically suitable or viable as a Data Centre location based on the following factors:

• Risk of Flooding

• Proximity of RAF Leuchars

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4.6.1 The site evaluation matrix ranks each site as to its potential as a data centre location. We have made a number of assumptions particularly in relation to fibre and power. Where we are awaiting further information, for the purpose of this matrix we have assumed that the minimum requirement by a data centre operator will be two diverse fibre routes, where we have no visibility we have scored the site at 5. We have applied the same criteria to existing power available on site and the potential to draw green energy on to site.

4.7.1 The due diligence process combined with the site evaluation matrix confirms that out of the five sites initially identified by Fife Council, three of the sites are suitable and two of the sites are not due to the factors outlined above.

4.7.2 Of the three suitable sites the Westfield Development Centre and the Tullis Russell site have at present the potential to use green energy. The Westfield site can draw energy from SSE’s gas-fired combined cycle gas turbine (CCGT) generatingpower station along with the proposed waste power plant and a Combined Heat and Power (CHP) Plant. The Tullis Russell development has the capability to draw green energy by Q4 2012 from the RWE Npower biomass power plant. The Lexmark facility at present does not have the ability to draw green energy within close proximity of the site, this contradicts Fife Councils aim to attract companies that would benefit from using large amounts of green energy.

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5 Market Commentary

5.1 Market Trends

We have set out below a number of trends that have become apparent over the last 12 months, and have commented how these may impact the market in general and also on Scotland.

5.1.1 Location UK

The Data Centre market is still very much London and south east England centric with London and the South East accounting for approximately 80% of transactions within the market over the last 3 years. In part this is because of technical reasons, in particular investment banks needing to be able to provide synchronous replication for their trading arms which in practice means they need to be within 50 fibre km of the City of London.

For others there is a perception that it is necessary to be close to their target occupier market which provided IT and Telecom services to end users, and thus for flexibility reasons, these tend to be concentrated around London and the M25.

This, in the majority of the cases, is still the situation, but due to the shortage and cost of power, CRC regulations, lack of suitable sites, technical changes (actual and perceived) and the improved fibre connectivity network, has meant that some end users will consider alternative locations, in particular for data storage if there is not an overriding operational reason to be located in a specific region. Combined with the positive factors of reduced running costs, lower ambient temperatures, greater potential for free cooling, and a host of ‘Green’ factors, there is a strong case to be made for anticipating that more data centres will be located outside of the south east of England.

The research highlighting this trend to decentralise from the south east of England is limited and not conclusive but we are aware of the following data centres which have been built or refurbished in recent years:

• BT Retail in Newport & Leeds • Marsh Group in Exeter • SunGard in Elland, Leeds • Attenda in Manchester • Telecity in Manchester

• Iomart in Nottingham, Leicester, and Glasgow • SSE in Portsmouth

• Atos Origin in Swindon, Livingston and Sunderland • HSBC in Normanton, Wakefield

• EDS in Wynards, Billingham, Teeside • Lloyds Banking Group in Lockerbie

Compared with the total data centre take up since reliable statistics have been recorded (2004), the percentage of take up outside of the south east would be not more than 20%. Will this trend continue?

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 23 Jones Lang LaSalle produce twice a year the Data Centre Barometer, the report comprises an independent market survey of the data centre industry’s key stakeholders from across Europe, undertaken by the independent data centre consultancy IX Consulting. One of the questions that was asked was :-

‘We would consider a data centre over 200 km away from our primary IT hub if there were significant (20%+) cost advantages’

50% of responses agree to some extent that they would be prepared to consider a data centre location over 200 km away from their existing facilities if they could be assured of cost savings of 20%.

Although this fall would seem slightly counter–intuitive, especially given the more cautious general attitude with regard to ongoing economic prospects, and despite the potential for savings offered by such a move, it would seem to reflect further evidence that locations a good distance from ‘central control’ are still not wholly acceptable amongst occupiers.

Indeed, breaking this down on a sector basis, our corporate respondents appear to show a greater deal of caution than indicated in previous surveys; around half of such responded positively a decline on the near three quarters who agreed with the statement in the last survey. Amongst IT Integrators, carriers and colocation operators, just less than half indicated that they would consider such an option, broadly in line with the findings from our Spring survey.

Source: The Jones Lang LaSalle Data Centre Barometer Survey – Autumn 2010

However compared with market sentiment in previous years, this is an encouraging trend and indicates that other regions maybe able to attract inward investment in the future. In theory, this should bode well for Scotland, but previously illustrated the take up outside the South East has been limited.

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Historically the activity has been centred around the Tier 1 Cities, Paris, Frankfurt , Amsterdam and Madrid. Post the telecom and IT IPO collapse in 2000, all of these cities had significant oversupply and only in the last 18 months has some form of equilibrium been established. Vacancy rates are at their lowest rates being between 5%- 25% in these Cities. A majority of the stock is within 10 kms of the city centres and has served the local markets.

However those regions that have been able to offer financial assistant (employment grants, competitive tax rates) significant power savings or are able to embrace new green technologies, have attracted the data centre storage giants such as Google and MSN. Whilst advantageous corporation tax rates are attractive, more importance is the cost of power and bandwidth capacity.

Those regions that are able to offer these characteristics, in particularly Switzerland, Ireland and the Netherlands, have attracted inward investment. Notable projects include:-

• Microsoft in Dublin • Google in Dublin • Yahoo in Switzerland • Google in Groningham

We are aware of that a number of these companies and networking sites, are considering further expansion in Europe for their cloud computing products. Microsoft have announced that they are seeking two further sites of 20 acres plus but will only consider areas that offer them the advantages outlined above.

A number of these internet giants are limited in terms of numbers and whilst the economic implication is important to the selected region, a greater impact would be if a significant number of data centre operators and occupiers would be prepared relocate to Europe if there were cost savings. In Jones Lang LaSalle Barometer Survey we asked:-

‘We would consider a data centre in an alternative country in Europe if there were significant (20%+) costs advantages’

Bearing in mind that the last survey quickly followed the disruption from the fallout of the Icelandic volcano eruption, it was therefore perhaps unsurprising that we saw reluctance amongst respondents to consider choosing to locate a new data centre in a different country in Europe, even with the chance of gaining 20% or more cost savings. Six months on and this reluctance has not abated, indeed the survey results suggest a weakening in the overall numbers of those who would be ready to consider such an option.

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In the medium term we do not believe that this trend will change but those regions that can offer the wider matrix of advantages, maybe able to capture, albeit limited in numbers, the Internet Giants and within the UK, Scotland could be a lead location.

5.1.3 Opex v Capex

However over the last few years a number of trends have become apparent and are outlined below.

Historically corporate occupiers either built their own facilities,or used System Integrators, such as IBM or HP to supply their needs, and if the IT need was relatively low in terms of power load required they acquired fitted out space with one of the specialist retail hosting companies.

This was still very much the case until the end of 2008 when the implications of the credit squeeze had a significant effect on the way companies satisfied their IT needs. In the 2 year period up to the end of 2008 some 2.5 million sq ft of space was acquired on a Capex basis vs circa 0.5 million sq ft on an Opex basis. Contrast this with 2009 where circa 240,000 sq ft was Opex and less than 20,000 sq ft on a Capex basis. The beneficiaries of this change were the wholesale and retails providers who acquired sites to absorb this demand. With ongoing difficulties in obtaining debt or the reluctance to use capital, companies are increasingly moving towards the Opex model and this is evident across all sectors from banks to system integrators. In the medium term we do not believe that this will change and the only groups developing their own sites will be the providers of technical floor space and companies such as Amazon and Google.

5.1.4 Site Criteria

The main site selection drivers are common to most occupiers and operators seeking new sites, and paramount are the availability of power, fibre, site security and neighbouring hazardous areas. However the availability of power has become of greater importance. This was borne out by the response to the question:-

‘When choosing a new data centre, please rank the following factors in order of importance where 1 is the most important and 5 is the least important’

Results from the latest survey unsurprisingly show that the availability of power continues to be the most important driver in the decision making process with regard to the choice of a new data centre, with over half of

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 26 respondents ranking availability of power as their first choice and around three quarters ranking it in their top two in order of importance – an increase on the two thirds recorded in the last survey.

Location was indicated to be the second in order for importance; around a quarter of respondents ranking it the most important factor and a further quarter ranking it second in importance. The efficiency of the data centre has climbed the ranks and is no longer, on average, ranked at the lowest importance relative to the other published factors – the availability of a skilled labour force now takes that honour.

From a corporate viewpoint three quarters ranked availability of power as either first or second choice in order of importance, unchanged from the previous survey. Amongst IT integrators and carriers and colocation operators, this proportion rose to around two thirds up from around half recorded in the Spring survey, with almost all the remainder ranking location as their number one choice.

We believe that this trend will continue and become more significant in the future, in particular the cost and resilience of power which will be become more of an issue, in particularly in south east of England.

5.1.5 Energy Costs

All commentators agree that these will increase, coupled with increased environmental legislation and the impact of Corporate Social Responsibility, energy costs are going to become of greater importance and could have an impact on expansion.

We asked the question will:-

‘Increased energy costs and carbon tax issues will have a negative affect on data centre take up over the next 12 months’

Since the last survey, there has not been any great change in the number of respondents who do not believe that the issue of increased energy costs alongside carbon tax will have a negative impact on data centre take up, and a similar proportion as last time also remain undecided.

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 27 Whilst not inherent in the figures below, amongst the corporate sector, this level of concern has fallen with around a quarter agreeing to some extent that a negative impact on take up could occur, a fall from the two fifths who shared that belief six months ago.

Companies that are involved in the Data Centre Market are concerned with these issues, and whilst they have and will continue to mitigate these costs by harnessing the latest energy saving technologies and enhanced engineering, data centres have become critical to the broader economy. Impact will be limited on demand but a great deal more focus will be placed on design and cost reduction.

5.1.6 Power Source

Given the introduction of legislation, as mentioned above, power from renewable energy resources is a major topic and whether it is designing the site to use free cooling, creating energy from waste or harnessing natural resources, will become a driving factor in site selection.

‘We believe that in the next 12 months we will actively source at least 10% of our data centre power explicitly from renewable power resources’

Our survey shows a significant change in sentiment amongst our respondents with regard to the question to imminent sourcing of renewable power resources for their data centre requirements. Around half agree that they will commit to a 10% minimum renewable power source over the coming 12 months, an uplift from the two fifths who stated this view in our Spring survey. Although the proportion of those disagreeing remains similar, the number of those remaining undecided on the issue has fallen from around a third of respondents to fewer than a quarter.

In our last survey we suggested that it is likely that renewable power resources remain high on the agenda and we would expect that, over time, the proportion of respondents agreeing with some sort of minimum commitment is likely to rise; and the evidence from the most recent survey suggest that this is indeed the case.

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With time we believe that this percentage will increase and there are only a limited number of sites or regions that will be able to meet this demand, in theory Scotland can compete favourably with competitors.

5.1.7 Fibre

The fibre penetration across the UK has improved, not only with the number of suppliers but also bandwidth. We are aware of fibre carriers BT, Thus (Cable & Wireless) and Virgin Media whose high speed fibre optic cables pass through Fife. However there is still a reluctance by data centre occupiers to consider locations more than 100km from London. Whilst in some cases, in particular Investment Banks, who need to have instantaneous synchronicity with their trading platforms, locating a site more than 50kms, could result in critical loss of data during any downtime, for other companies it is not so much of an issue.

The reasons often quoted by companies for not locating into new regions include :- • Increase cost- both capex and opex

• Competition- to avoid overcharging if limited number of suppliers

• Redunancy-spare capacity in network infrastructure for growth and resilience • Speed- latency issues

• Diversity- limited access to multiple network operator • Dark Fibre- limited supply of unlit private networks

To some extent these reasons are valid, in particular for the number of carriers, speed and cost of connections. Whilst there are major networks connecting Scotland to Europe, the USA and England (Hibernia Cable) and a number of networks that backhaul to London’s Telehouse Data Centre (the UK’s major network link hub), carriers such as Cable & Wireless, Global Crossing, Neos and Geo either run their own networks or run through POP sites, such as Scolocate.

Fibre is still considered a potential issue when considering regional data centres. By way of example a carrier neutral data centre requires a minimum of 4 diverse carriers, the London sites have at least 20 plus providers but corporates require at least 2 diverse carriers. However this a common challenge for all the regions and the major centres in Scotland are as well served as other competing regions such as the north east of England.

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According to our research, total take up for 2010 across all UK regions amounted to 597,000 sq ft, an increase of 19% on 2009’s total take up figure of 484,000 sq ft. With the exception of seven transactions totalling 54,000 sq ft (9% of total take up), five of which involved fitted space, was all transacted within London and the south east.

Of total take up for London and the South East (543,000 sq ft), 116,000 sq ft (21%) involved end users acquiring fitted wholesale space with the average transaction involving just over 8,000 sq ft of space.

The following nineteen wholesale transactions were concluded in 2010 with five of the transactions taking place outside of London and the South East:

All of the above transactions were secured in multi-let data centre facilities with the balance of take-up (427,000 sq ft) involving existing Data Centres or shell buildings for conversion either with planning and power or a guaranteed pathway for delivery.

The following chart demonstrates the breakdown of take up by sector. As with 2009, Hosting remains the most active sector accounting for 66% of Total Take Up with take up from Banks remaining constant accounting for 11% of take up, down slightly from 2009 (13%).

Occupier Size (Net Technical –

sqft) Sector Location

Coreix 4,500 sq ft Hosting Inside London & SE

CSFB 10,000 sq ft Bank Inside London & SE

Goldman 5,000 sq ft Bank Inside London & SE

Undisclosed Bank 5,000 sq ft Bank Inside London & SE

Macquarie 3,000 sq ft Bank Inside London & SE

Cantors 5,000 sq ft Bank Inside London & SE

RBS 37,500 sq ft Bank Inside London & SE

Undisclosed Bank 10,000 sq ft Corporate Inside London & SE

3663 Foods 4,000 sq ft Corporate Inside London & SE

Undisclosed Corporate 5,000 sq ft Corporate Inside London & SE

MF International 5,000 sq ft Corporate Inside London & SE

ITV 2,000 sq ft Corporate Inside London & SE

Visa 10,000 sq ft Corporate Inside London & SE

HP 10,000 sq ft Managed Services Inside London & SE

Talk Talk 2,000 sq ft Telco Outside London & SE

Thomson Reuters 5,000 sq ft Corporate Outside London & SE

Environment Agency 5,000 sq ft Government Outside London & SE

Steria 7,000 sq ft Managed Services Outside London & SE

Logica 10,000 sq ft Managed Services Outside London & SE

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Data Centre Providers Corporate Occupiers / Single Site Solutions

It is worth highlighting that the 427,000 sqft is distorted by two significant transactions totalling 328,000 sq ft (Colt’s purchase of 208,000 sq ft in Welwyn Garden City and Telecity’s acquisition of 120,000 sq ft in Park Royal).

The chart below demonstrates how the corporate occupier market (including banks) has moved away from large stand alone solutions to outsourcing IT requirements since 2008, a trend we anticipate will continue in 2011 and beyond.

Data Centre Development in Fife Feasibility Study January Maximising value through expertise